Here's Why Soaring Commodity Prices Are Due To A Strong Economy And Not Dollar Debasement

Commodity prices can soar due to both strong economic growth or dollar devaluation, given that global prices are in dollars.

As many market observers point to surging commodity prices as a sign of the Fed destroying the U.S. dollar, perhaps they should note that, actually, the dollar is far less correlated with commodity prices than it used to be.

Calafia Beach Pundit:

The rise in commodity prices which began early last year has not been nearly as well correlated to the dollar (-0.36) as it was in the mid-2001 to late 2008 era (-0.87), which in turn suggests that there have been other factors at work since early last year that have been more dominant, namely the forces of recovery.


By other factors, the author means economic strength globally, whereby demand pulls up prices rather than simply fears about the dollar’s value. Basically, as commodities have surged lately, the dollar hasn’t actually lost much value. People forget that the Dollar Index is at a stronger level that it was at during 2008… yet commodity prices are much, much stronger than 2008.

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